Social Enterprise is a global movement that is steadily building momentum here in Auckland. Leaders from government, not for profit and business sectors are recognizing that social enterprise offers a unique combination of social purpose and financial independence, and provides a new option for both customers and suppliers alike.
Social Enterprises are hybrid organisations that trade goods and services to achieve social, environmental, economic, and cultural outcomes. A common way to describe this is to use a spectrum with traditional charities at one end and traditional businesses at the other, with varieties of social enterprise occupying the space in between.
A social enterprise is an organisation that seeks to tackle social, cultural or environmental challenges. Like a traditional business, a social enterprise sells goods and services. However, instead of profits being distributed to shareholders or individuals, they are used to support the organisation’s mission.
Often social enterprises exhibit a mix of the characteristics of both businesses and not-for-profit organisations. A large variety of organisations call themselves a ‘social enterprise’. These generally fall into two broad categories; organisations that are established with social enterprise in mind, and organisations that adopt social enterprise practices to replace or supplement existing fund raising activities. (Kirkman 2012)
There is no single definition of social enterprise. Government and non-government organisations around the world use a variety of characteristics to define social enterprise. The Department of Internal Affairs and the Office of Ethnic Affairs define a social enterprise as an organisation that demonstrates:
Additionally, social enterprises are self governing, not part of the State and have the independent authority to wind up their own operations.
Social enterprise is not a new idea. Over the years many people have sought to use their businesses to benefit wider society. However, social enterprise is being increasingly recognised as a credible means to address social, cultural or environmental challenges that cannot be solved by not-for-profit organisations, the private sector or the government alone. (Bloom 2009; Smith, Cronley and Barr, 2012)
A number of things have contributed to the emerging popularity of the social enterprise business model, including increasing competition for both public and private economic resources, the economic downturn leading to restricted philanthropy, increasing awareness about social enterprise, and the potential for unrestricted income. (Smith, Cronley and Barr, 2012; Weisbrod, 1998)
Essentially, social enterprise has become an important means for those trying to address social, cultural or environmental challenges because it provides an opportunity to develop sustainable and independent funding for activities that have traditionally required charitable donations or government grants. (Weisbrod, 1998)
You can find a range of reports, presentations, YouTube videos, articles and website links that provide information about social enterprise.
Social Enterprise is a relatively new concept in New Zealand. Since the early 2000’s governments in the UK, Canada, Australia and the USA, have all invested significant amounts of money in establishing viable social enterprise sectors. Social Enterprise UK (established 2002) estimates that there are more than 62,000 social enterprises in the UK that contribute £24 billion to the UK economy and employing almost one million people. In Australia, Social Traders (established in 2008) estimate 20,000 social enterprises now exist and that these contribute 2% of Australia’s GDP. In February 2014 the New Zealand government announced its first financial support for social enterprise in New Zealand with $1.27M of funding for the Hikurangi (now Ākina) Foundation.
Social enterprise provides a unique alternative to traditional social service provision. Traditionally social, environmental, economic, and cultural initiatives are developed and implemented by government (the public sector), and delivered in partnership with either business (the private sector), or charities (the community sector). Government agencies now have another option, and are increasingly partnering with social enterprises to develop innovative new approaches to solving tough problems. Social enterprise combines public benefit with commercial acumen and is sometimes described as ‘the fourth sector’ because their approach combines aspects of all three traditional ways of operating.
In New Zealand we have no specific legal form that recognises social enterprises unique contribution so social entrepreneurs use both limited liability companies (LLC’s) and charitable trusts (CT’s) and often a combination of these (a business owned by a trust) to structure their enterprises. An organisation’s legal structure is not always useful in understanding whether an organisation is a social enterprise or not.
Social Enterprise Auckland has developed the following criteria to help promote effective social enterprises in the region:
1. Purpose – A Social Enterprise can clearly articulate their social, environmental, economic, or cultural purpose. This should be recorded in the organisations founding documentation.
2. Trade – A Social Enterprise earns the majority of its income from the sale of goods or services.
3. Profit – A Social Enterprise makes a profit and invests the majority of that profit in achieving their stated purpose.
4. Impact – A Social Enterprise can measure the difference they are making and use this information to ‘prove and improve’ their impact.